1. Field of the Invention
The present invention relates to the field of electronic transactions. More specifically, the invention relates to systems and methods of evaluating risk associated with electronic check transactions.
2. Description of the Related Art
Many customers are using electronic transaction technologies to pay merchants for goods and services instead of using the more traditional methods of payment, such as cash and paper checks. A debit card is one device that uses electronic transaction technology. With a debit card, a merchant knows immediately if sufficient funds exist in the customer's account to cover the payment of the goods and services.
Another electronic transaction device is a check card, such as an Automatic Clearing House (ACH) check card, which is processed electronically through the Automatic Clearing House system. One advantage for the merchant of accepting check cards is that the check card's transaction cost is less than the debit card transaction cost. However, it takes much longer to determine if sufficient funds exist in the customer's account with the check card than with the debit card.
While it is advantageous for the merchant to accept the check card to reduce costs, the merchant is taking a risk that the funds promised by the check card are not paid due to insufficient funds in the customer's account.
In order to manage financial transaction risks, some merchants subscribe to a service that accesses risk associated with financial transactions. To overcome the difficulties associated with check cards, the service may guarantee the electronic check transaction at the point of sale. The advantage to the subscribing merchant is that transactions will cost less and be substantially risk free.